Principles: Life and Work

by Ray Dalio

Don’t mistake possibilities for probabilities. Anything is possible. It’s the probabilities that matter. Everything must be weighed in terms of its likelihood and prioritized.

Great decision makers don’t remember all of these steps in a rote way and carry them out mechanically, yet they do follow them. That’s because through time and experience they’ve learned to do most of them reflexively, just as a baseball player catches a fly ball without thinking about how he’s going to do it.

Simplify! Get rid of irrelevant details so that the essential things and the relationships between them stand out.

Use principles. Using principles is a way of both simplifying and improving your decision making.

Slow down your thinking so you can note the criteria you are using to make your decision.

Write the criteria down as a principle.

Think about those criteria when you have an outcome to assess, and refine them before the next...

You can use your own principles, or you can use others’; you just want to use the best ones possible well. If you think that way constantly, you will become an excellent principled thinker.

Believability weight your decision making I have found triangulating with highly believable people who are willing to have thoughtful disagreements has never failed to enhance my learning and sharpen the quality of my decision making.

Convert your principles into algorithms and have the computer make decisions alongside you. If you can do that, you will take the power of your decision making to a whole other level.

Algorithms work just like words in describing what you would like to have done, but they are written in a language that the computer can understand. If you don’t know how to speak this language, you should either learn it or have someone close to you who can translate for you. Your children and their peers must learn to speak this language because it will soon be as important or more important than any other language.

By developing a partnership with your computer alter ego in which you teach each other and each do what you do best, you will be much more powerful than if you went about your decision making alone.

The computer will also be your link to great collective decision making, which is far more powerful than individual decision making, and will almost cert...

In fact, I believe that it won’t be long before this kind of computerized decision making guides us nearly as much as our brains do now.

it’s possible to create a decision-making system that takes in data, applies and weighs the relevant criteria, and recommends a decision.

specifying our work principles in algorithms and using them to aid in management decision making, are just bigger and more complicated versions of that smart thermostat. They allow us to make more informed and less emotional decisions much faster than we could on our own.

As these machines help us, they will learn about what we are like—what we value, what our strengths and weaknesses are—and they will be able to tailor the advice they give us by automatically seeking out the help of others who are strong where we are weak.

Before too long, you will be able to tap the highest-quality thinking on nearly every issue you face and get the guidance of a computerized system that weighs different points of view.

While this kind of view often leads to talk of artificial intelligence competing with human intelligence, in my opinion human and artificial intelligence are far more likely to work together because that will produce the best results. It’ll be decades—and maybe never—before the computer can replicate many of the things that the brain can do in terms of imagination, synthesis, and creativity. That’s because the brain comes genetically programmed with millions of years of abilities honed through evolution. The “science” of decision making that underlies many computer systems remains much less valuable than the “art.”

Software developers, mathematicians, and game-theory modelers aren’t running away with all the rewards; it is the people who have the most common sense, imagination, and determination.

Computers have much greater “determination” than any person, as they will work 24/7 for you. They can process vastly more information, and they can do it much faster, more reliably, and more objectively than you could ever hope to.

The process of man’s mind working with technology is what elevates us—it’s what has taken us from an economy where most people dig in the dirt to today’s Information Age.

At Bridgewater, we use our systems much as a driver uses a GPS in a car: not to substitute for our navigational abilities but to supplement them.

Be cautious about trusting AI without having deep understanding.

The main thrust of machine learning in recent years has gone in the direction of data mining, in which powerful computers ingest massive amounts of data and look for patterns. While this approach is popular, it’s risky in cases when the future might be different from the past.

A lot of people vest their blind faith in machine learning because they find it much easier than developing deep understanding. For me, that deep understanding is essential, especially for what I do.

Understanding these relationships as I do has saved me from making mistakes when others did, most obviously in the 2008 financial crisis. Nearly everyone else assumed that the future would be similar to the past. Focusing strictly on the logical cause-effect relationships was what allowed us to see what was really going on.

When you get down to it, our brains are essentially computers that are programmed in certain ways, take in data, and spit out instructions. We can program the logic in both the computer that is our mind and the computer that is our tool so that they can work together and even double-check each other. Doing that is fabulous.

We would need to make sense of the formulas the computer produces, of course, to make sure that they are not data-mined gibberish, by which I mean based on correlations that are not causal in any way.

Of course, given our brain’s limited capacity and processing speed, it could take us forever to achieve a rich understanding of all the variables that go into evolution.

We are headed for an exciting and perilous new world. That’s our reality. And as always, I believe that we are much better off preparing to deal with it than wishing it weren’t true.

In order to have the best life possible, you have to: 1) know what the best decisions are and 2) have the courage to make them.

To acquire principles that work, it’s essential that you embrace reality and deal with it well.

You will determine what your own loops look like.

Different people with different abilities working well together create the most powerful machines to produce achievements.

The ego barrier is our innate desire to be capable and have others recognize us as such. The blind spot barrier is the result of our seeing things through our own subjective lenses; both barriers can prevent us from seeing how things really are. The most important antidote for them is radical open-mindedness, which is motivated by the genuine worry that one might not be seeing one’s choices optimally. It is the ability to effectively explore different points of view and different possibilities without letting your ego or your blind spots get in your way.

This is where understanding something about how the brain works and the different psychometric assessments that can help you discover what your own brain is like comes in. To get the best results out of yourself and others, you must understand that people are wired very differently.

learning how to make decisions in the best possible way and learning to have the courage to make them comes from a) going after what you want, b) failing and reflecting well through radical open-mindedness, and c) changing/evolving to become ever more capable and less fearful.

We all need others to help us triangulate and get to the best possible decisions—and to help us see our weaknesses objectively and compensate for them. More than anything else, your life is affected by the people around you and how you interact with each other.

an actual, practical, believability-weighted decision-making system converts independent thinking into effective group decision making.

I hope these principles will help you struggle well and get all the joy you can out of life.

Look to the patterns of those things that affect you in order to understand the cause-effect relationships that drive them and to learn principles for dealing with them effectively.

Dreams + Reality + Determination = A Successful Life.

Truth—or, more precisely, an accurate understanding of reality—is the essential foundation for any good outcome.

Be radically open-minded and radically transparent.

Radical open-mindedness and radical transparency are invaluable for rapid learning and effective change.

Don’t let fears of what others think of you stand in your way.

Embracing radical truth and radical transparency will bring more meaningful work and more meaningful relationships.

Look to nature to learn how reality works.

Don’t get hung up on your views of how things “should” be because you will miss out on learning how they really are.